Exterior view of the United States Court of Appeals, Ninth Circuit
- The Ninth Circuit Court of Appeals heard arguments today on the Department of Education’s motion to block the Sweet v. McMahon borrower defense settlement.
- Judge Wardlaw indicated impatience at the government’s delay, saying: “The time for negotiations is over. You missed your deadline.”
- More than 200,000 student loan borrowers are waiting for loan forgiveness as a result of this lawsuit.
A federal appeals court heard arguments Friday over whether the Education Department can further delay a court-approved settlement that promises loan discharge, payment refunds and credit report correction to more than 200,000 student loan borrowers who say they were defrauded by their colleges.
Case, Sweet vs. McMahonHas been working through the courts since 2019 (as a result, the case has changed names a few times: Sweet v. DeVos and Sweet v. Cardona). The agreement, worth up to $12 billion, set firm deadlines for the department to process borrower defense on repayment applications. The department has missed those deadlines and has asked for extensions several times. So far, those requests have been denied.
During Friday’s hearing before the Ninth Circuit Court of Appeals, Judge Kim McLane Wardlaw offered a blunt assessment: “The time for negotiations is over. You missed your deadline.”
The court is now considering the department’s motion to stay the settlement while it appeals.
Screenshot of the court hearing where Judge Wardlaw reprimands the government lawyer.
What is Sweet vs McMahon?
Sweet v. McMahon (sometimes still referred to as Sweet v. Cardona) is a class-action lawsuit filed during the first Trump administration. It accused the Education Department of delaying a decision on Borrower Defense for Repayment applications — a federal program designed to provide loan relief to students defrauded by their schools.
The College Investor team filed a FOIA request in 2023, and at that time, 59% of all borrower defense claims were still pending.
Under the Biden administration, the department struck a deal that set deadlines for processing applications and promised timely decisions or automatic relief to three groups of borrowers. A central part of the agreement is Exhibit C, a list of 151 schools that the department has identified as having strong indicators of substantial misconduct. Borrowers who enrolled in those schools and filed applications during class periods were promised expedited treatment.
Full settlement relief includes forgiveness of the borrower’s federal student loan balance, refund of past payments, and correction or removal of adverse credit reporting.
This relief is a contractual obligation under a court-approved agreement.
Delay in loan waiver claims
The current appeal is the latest in a series of attempts by the Education Department to avoid meeting its settlement obligations. Here’s how the timeline has unfolded:
At the end of 2025: The department asked U.S. District Judge William Alsup for an 18-month extension to process the borrower’s rescue claims. Under Secretary of Education Nicholas Kent argued that the agreement “imposes a deadline under which the Department would be required to automatically cancel up to $12 billion in student debt by January 2026 without proper investigation.” At the time, the department reported that it was adjudicating approximately 1,500 applications per month, with approximately 193,000 applications still undecided.
December 11, 2025: Judge Alsup ruled that applications involving Exhibit C schools must be decided by the original deadline of January 28, 2026, or automatically approved. He described the 18-month request as “unacceptable”.
January 28, 2026: The Department missed the court-ordered deadline, triggering the settlement’s automatic relief provision for Exhibit C post-class borrowers who did not receive a judgment.
February 24, 2026: The department filed a notice of appeal (PDF file) and on February 27, filed a motion to stay the Ninth Circuit.
March 20, 2026: The Ninth Circuit heard oral arguments on the Department’s motion. The court’s decision is pending.
What does this indicate for hearing borrowers
Judge Wardlaw’s statement that “the time for negotiations is over” is a strong signal from the appellate bench. Although the Ninth Circuit has not yet issued a decision, the comments suggest limited patience for the Department’s ongoing efforts to delay.
It is important to remember that filing an appeal does not automatically stay the lower court’s orders. Unless the Ninth Circuit issues a separate stay, the automatic discharge must proceed under the settlement terms.
You can watch the hearing here:
What this means for student loan borrowers waiting for loan forgiveness
If you filed a borrower defense application and attended a school on the Exhibit C list, your status depends on whether you receive a decision by January 28, 2026.
Exhibit C Post-Class Applicants Who Did No Those receiving judgments by January 28, 2026 are entitled to full settlement relief. The Education Department will have to send you information about eligibility by March 30, 2026. Your loan waiver and other eligible relief must be distributed within one year of receiving that notice.
Post-class applicants who did not attend Exhibit C School are due a decision from the Department by April 15, 2026.
In the meantime, borrowers will have to keep an eye on the outcome of this case and how the court will rule.
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